The cash will be used to pay down substantially all of the company's debt and free up plenty of capital that could be returned to shareholders. But investors seem unimpressed. Dole's stock has fallen 26% since the deal was announced. The shares closed on Friday at $10.15.

We think that's an opportunity. Dole trades at a deal-adjusted enterprise value of 6.7 times 2013 estimated earnings before interest, taxes, depreciation, and amortization—in line with historical multiples for fruit companies. But after you factor in the company's 113,000 acres of farmland, including 25,000 acres on Oahu—of which 16,500 are listed for sale, the valuation falls to just four times Ebitda. The company values the land at $500 million.

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Dole's shares could be worth more than double their current price, and while shareholders aren't likely to see that value realized in a hurry, the divestiture is a step in the right direction. Over the next year, the stock could rally 25% or more.

FOUNDED IN HAWAII in 1851 as Castle & Cooke—the name was changed to Dole in 1991—the company is the world's largest fruit-and-vegetable producer, selling produce in North America, Europe, and Asia. In recent years, it has been in and out of the public markets. In 2003, investor David Murdock, who has controlled Dole since 1985, took it private, only to bring it public again in 2009, in a $446 million offering priced at $12.50 a share. Murdock, 89, owns 40% of the stock.

Dole is the largest banana brand in North America and Japan, and No. 2 in Europe. Bananas, which are grown in Latin America and the Philippines, generate about 28% of revenue. The company also has the leading market share in iceberg lettuce, celery, cauliflower, and packaged salads. Dole's packaged-fruit bowls dominate the North American market.

In 2011, fresh fruits accounted for 69% of sales; packaged foods, 17%; and vegetables, 14%. Once the sale closes, fresh fruits will account for 80% of sales, and vegetables, 20%.

In 2012, analysts estimate, Dole earned $75 million, or 86 cents a share, on $6.6 billion in revenue. On Thursday, Dole reported that 2012 sales, adjusted for the divestiture, fell 11%, to $4.2 billion, primarily as a result of weak banana pricing in North America. The vegetable segment grew, however, as pricing for packaged salad ticked up. Management's guidance for the year ahead calls for much of the same. The company plans to cut costs next year by $20 million by restructuring its remaining businesses.

Dole Food/ DOLE

Recent Price

$10.15

52-Week Range

$15.19-$8.29

Market Value

$901 million

Est 2013 Revenue

$4 billion

Est 2013 Net Income

$75.6 million

Est 2013 EPS

$0.84

EV/2013 Ebitda

6.7

Pro forma 2013 estimates.

Sources: Bloomberg; company reports; Boyar Intrinsic Value Research

This year, the new Dole could earn $76 million, or 84 cents a share, on sales of $4 billion, according to Boyar Intrinsic Value Research. Boyar sees net debt falling to $288 million from $1.6 billion, driving free cash flow to $97 million in 2013, up from -$77 million in 2011. This could let the company return capital to shareholders through a special dividend or share repurchase. Jonathan Feeney, who covers Dole for Janney Capital Markets, recently wrote that a special dividend could add $3 a share in value, and a buyback, $5.

MANAGEMENT HAS BEEN MUM on any plans to return cash to shareholders, but it has brought up the possibility of acquisitions. In a Dec. 6 news release, General Counsel Michael Carter said the new capital structure "will allow us to react quickly to any acquisition opportunities in the commodity-produce sector."

When the deal closes, Murdock will become CEO, and Carter becomes president and COO. Citing the management changes, Boyar maintains that the company could soon be sold. It's worth noting that Murdock sold $300 million of stock in November to pay off a personal loan, reducing his stake to 40% from 65%.

Boyar estimates that Dole shares are worth $22. It gets that figure by applying a seven times multiple to 2014 estimated Ebitda for the fruit business and an eight times multiple for vegetables, and assigning a $300 million value to Dole's noncore real estate. If that estimate is even close, the outlook for Dole is sweet indeed.